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Managing Wastewater in Coastal Urban Areas (1993)

Chapter: E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY

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Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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E Policy Options and Tools for Controlling Coastal Environmental Water Quality

THE INSTITUTIONAL SETTING

Institutionalized Fragmentation

Three types of fragmentation exist within the institutional setting for wastewater treatment in coastal areas:

Hierarchical—Important responsibilities for coastal water quality reside at every level of government—federal, state, regional, local, and tribal. At each level there may be multiple entities, each with important functions.

Geographic—Bays, sounds, estuaries, and other near-coastal water bodies and their tributary watersheds invariably encompass multiple local and regional jurisdictions. Frequently these jurisdictions have overlapping areas of responsibility. For example, a regional sewage treatment system may have to interact with numerous other local jurisdictions with respect to both sewage and stormwater management.

Functional—Perhaps the greatest challenge to achieving effective water-quality management, as well as accomplishing other environmental goals, is the increasing compartmentalization of functions.

  • Water quality considerations themselves are fragmented. Sewage treatment, stormwater management, nonpoint source control, and point source regulatory programs are often conducted in virtual isolation from one another, despite the fact that these sources are in fact interrelated, interacting

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

both in the watersheds and in the marine environment. In most regions, fragmentation of water quality responsibilities is exacerbated by significant gaps in coverage: nonpoint source control and toxicant elimination are two relatively neglected areas.

  • Regional land use, growth management, and natural resource planning are usually undertaken in isolation from wastewater planning and discharge permitting programs. In addition, these planning activities are often divorced from implementation activities. With the continuing rapid pace of population growth in many coastal areas, land-use and transportation decisions actually have as much to do with future water quality as the issues usually considered within the scope of water quality programs.

  • Water quality is generally evaluated and addressed as if air pollution, solid and hazardous waste, and land-use and water-use decisions were unrelated issues. The converse is also true. This compartmentalization of environmental problems obscures the important ways in which these issues affect each other and hinders effective solutions, especially pollution prevention strategies.

  • Funding for water quality and other environmental programs is a patchwork at the federal, state, and local levels. The way money is collected, earmarked, and spent on water quality improvements tends to reinforce fragmentation and the resulting inability to consider and rank priorities on any broad basis.

Jurisdictional Complexity

A typical coastal area includes hundreds of jurisdictions, agencies, and other public bodies on its list of important water-quality actors. Numerous agencies and jurisdictions may exist within a single tributary watershed. Each agency may have several separate bureaucracies with relevant programs, requirements, and responsibilities. A pertinent example is the Puget Sound region of Washington State, where 454 public entities exercise jurisdiction over water quality and related ecosystem management including ''6 federal agencies, 5 state agencies, 12 county governments, 14 tribal governments, 100 cities, 40 port districts, 110 water districts, 42 sewer districts, 25 diking districts, 50 drainage districts, 15 flood control districts, 12 soil and water conservation districts, 14 parks and recreation districts, and 9 public utility districts" (PSWQA 1984).

At the federal level, the Environmental Protection Agency (EPA), the National Oceanic and Atmospheric Administration, the U.S. Army Corps of Engineers, the Fish and Wildlife Service, and the Department of Transportation are important actors in any coastal area. In some parts of the country, the U.S. Forest Service, the National Park Service, and others have significant water-quality related programs.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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At the state level, separate agencies often are responsible for natural resource management, environmental regulation, community development, land use, and transportation. Local jurisdictions in most states cover very limited geographic areas yet retain major responsibilities for planning, land use, wastewater treatment, stormwater management, water supply, and solid waste. Some states have sub-state regional agencies for some of those responsibilities; all states have a plethora of special purpose districts for sewage treatment, water supply, flood control ports, soil conservation, and other purposes. In some states, tribal governments have direct environmental regulatory programs, sewage treatment responsibilities, and significant jurisdiction over natural resources, including marine fisheries.

Toward Integration of Environmental Decision Making

The foregoing is not intended to represent the details of any specific place, but rather to present the overall institutional challenge: how can environmental decisions in coastal areas, including specific decisions about wastewater management, be made in a large enough context with adequate mechanisms to set and implement priorities? Many past debates over specific wastewater treatment decisions have been couched in terms of priorities but have taken place in institutional situations where implementation of alternate strategies would be very unlikely, even if a particular project or proposal were rejected on the basis that some other project or proposal was more urgent. For example, sewage treatment jurisdictions resisting upgrading to secondary treatment have usually argued that the same amount of money could be more effectively invested in stormwater management or other nonpoint source reduction, even though an equivalent amount of money could not be made available for these needs.

There are signs of progress toward integration of decision-making in coastal areas:

Estuary protection strategies—In some major estuaries, comprehensive plans are being pursued to protect water quality and marine resources, including the sometimes huge tributary watersheds where most of an estuary's problems originate. Such efforts typically demand a specific governmental mechanism to cut through the bureaucratic turf, to coordinate multiple agencies, and to oversee plan implementation.

Regional water resource agencies—Some states have created regional water-resource management entities to have a big picture perspective on water-related decisions and priorities. Such agencies are becoming major actors in issues regarding wastewater discharges in coastal areas.

Growth management/land-use strategies—Some states are undertaking growth management plans that attempt to integrate land use, natural re-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

source, transportation, and—to some extent—pollution prevention strategies. These strategies can be an important way to link land use and water pollution issues.

Establishing real links among the several dimensions of water quality management, specifically, and resource protection, generally, is an extremely difficult matter, requiring flexibility in approaches to suit the political and institutional realities of each state or region. The integrated state-policy framework being developed in states such as Florida, Maine, Vermont, Georgia, and potentially Washington represents the most comprehensive approach. The Puget Sound estuary management plan is an example of a comprehensive attempt to protect a major water body and its tributaries through the coordinated actions of hundreds of entities at the local, tribal, state, regional, and federal level. Less comprehensive strategies are also possible and can bring about major improvements.

Planning in isolation at all levels—state, regional, and local—has been standard practice in the past, but this resource-destructive pattern is being called into question and actually changed by new integrated growth management systems and estuary management programs. These systems are appearing first in coastal states and thus have a special significance for this study.

Maine and Georgia illustrate the potential for growth management systems to integrate water quality and quantity programs, not only with related resource management programs but also with transportation, land-use, and other relevant systems. In both states, there is a set of state policies (standards and criteria) that frame the requirement of consistency binding the whole system together. All state, regional and local governments are required to develop new plans and to implement programs that are consistent with the state policies and with each other.

In Maine, state agencies are just completing the redrafting of their plans, which will be reviewed for consistency at the state level. Resource management goals and policies are part of the framework in each state, and the existing programs of state resource agencies are being redrawn to fit with each other, with a similar requirement at the regional and local levels.

While these programs are too new to allow more than preliminary judgments about their effectiveness, they show great promise for strengthening the functional links between and among programs in water resources and related resource management, transportation, land-use and economic development programs.

In California, a state growth policy is being fashioned that will set the framework for new regional strategies to better integrate land use and resource management programs. Governor Wilson signaled his commitment to closer coordination by stating, in connection with his proposal for a new umbrella organization called the California Environmental Protection Agency:

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

"To continue to divide responsibility for the environment between a dozen agencies dilutes accountability for all state environmental programs." The California Environmental Protection Agency, implemented in July 1991, includes the following agencies:

  • Air Resources Board,

  • Integrated Waste Management Board,

  • State Water Quality Resources Control Board (includes the regional Water Quality Control Boards),

  • Department of Toxic Substances Control,

  • Department of Pesticide Regulation, and

  • Office of Environmental Health Hazard Assessment.

When the California EPA effort is coupled with the governor's announced support for a new regional governance framework that will link regional agencies under a policy and fiscal organization capable of assuring the linkage of land use, transportation, and resource management programs, a promising governance framework can be seen. The California experience underscores the importance of leadership, especially at the highest level. The foment of activity in California is a direct result of a new governor with a new agenda that includes, among other things, better management of water resources at the state and regional levels. This new framework unfortunately is being implemented during a time of severe fiscal crisis and only time will tell if the promised results can be achieved.

MANAGEMENT TOOLS

Command-and-Control

The centerpiece of the nation's regulatory system for restoring and protecting the quality of its waters is the Clean Water Act (CWA) (33 U.S.C. 1251 et seq.).1 This legislation consists primarily of command-and-control measures. Some provisions of the act apply other management tools, however, such as financing/economic instruments (the Construction Grant Program) and limited land-use planning and growth management techniques. In order to simplify exposition, the entire act is discussed in this section.

The modern version of the CWA was first enacted in 1972. There have been four major amendments to the statute since then—in 1977, 1981, 1984, and 1987. The bulk of this section is focused on the CWA; however, there are other important statutes briefly discussed in the concluding paragraphs,

1  

References to United States Code are cited with the title followed by "U.S.C." and the section.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

such as the Coastal Zone Management Act (16 U.S.C. 1415 et seq.) and the Marine Protection, Research, and Sanctuaries Act (33 U.S.C. 1401 et seq.).

The purpose of this section is to provide the reader with a general overview of the existing command-and-control regulatory scheme, especially as it relates to the disposal of wastes in urban coastal areas. It will also identify areas where the statutory scheme seems to be inadequate to provide either sufficient protection of aquatic resources or the most effective application of control or management techniques.

The Regulatory System

The CWA regulatory system is complex. Yet, several broad strategies can be identified that form the basic implementation system. Each of these is described briefly below. Certain issues are discussed in greater depth as they particularly relate to the urban setting.

Standards. The CWA seeks to apply standards to those activities that could affect water quality. Beginning in 1972, the focus of this standard system has been upon point source discharges; that is, the pipes releasing effluents of municipalities and manufacturing firms. Standards have been derived from two different perspectives: 1) treatment technology based standards, and 2) water-quality based standards. The technology based standard has generally been considered the minimum acceptable requirement, to be applied universally, while more rigorous water-quality based standards have been implemented where necessary for particular water bodies. For industry, the CWA requires that technology based requirements be applied. The first industry standards were those that were derived from the best practicable treatment technology. Subsequently, a more restrictive standard based on best available technology (BAT) was required.

Permits. Standards are applied to point sources through the National Pollution Discharge Elimination System (NPDES). Under this system, each point source discharger must hold a NPDES permit. The permit contains the numerical standards as well as other requirements which the discharger must meet. Pursuant to the 1987 amendments of the CWA, permits are renewed every ten years, although specific provisions may be modified at any time. Approximately 384,000 dischargers are now covered by NPDES permits.

Compliance. The CWA sets forth a comprehensive system for evaluating whether a permittee is in compliance with its permit requirements, as well as enforcement procedures where non-compliance is found. This system is based on a monitoring system that is carried out and reported upon

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

by the permitted dischargers as well as an independent system carried out by government regulators. Penalties include civil and administrative fines as well as possible criminal prosecution. The government may also seek injunctive relief. There are also substantial provisions for citizen initiated law suits.

Federalism. The federal government has recognized that the states are an essential ingredient in successful implementation of the CWA. Thus, a state that is capable of achieving substantial portions, or all, of the objectives of the federal law may apply for, and receive, delegation of authority (known as primacy) to administer the provisions of the federal program. Where such delegation has occurred, there is a complex system of federal oversight to review the conduct of the state program. As of late 1992, 38 states and 1 territory held primacy over their NPDES programs. Of those, 27 states are authorized to run their own pretreatment programs.

Funding. The federal government has provided financial subsidies to states and municipalities for the purpose of wastewater treatment plant construction and other activities related to water quality since the late 1950s. Starting in 1972, the CWA greatly increased federal funding for eligible projects. Until 1987, this assistance was in the form of federal grants ranging up to 75 percent of the cost of construction of wastewater treatment plants and other central facilities. Through 1991, the total federal expenditure for the Construction Grant Program has been about $50 billion. It is estimated that state and local construction expenditures during the same period total $26 billion. Since that date, the federal role has been to provide assistance to the states for the creation of revolving loan funds. Subsidies to this program have totaled $5 billion; this assistance has been extended by congressional action through 1993.

Nonpoint Sources. Discharges from diffuse sources are subject to varying degrees of regulation under the CWA. Nonpoint source regulation has had only limited effectiveness; these sources of pollution now account for the majority of water quality problems in many of the nation's water bodies. A major category of nonpoint sources is the storm and combined sewer systems of urban centers. While combined sewer overflows (CSOs) have been subject to regulation since 1972, little progress was made until recently. The EPA had no national strategy for CSO control until September 1989 (Federal Register 1989). A second type of nonpoint source is the even more diffuse pollution that comes from general urban development and from agricultural activities. The 1987 amendments to the CWA began the process of regulating these sources of water pollution through the establishment of rudimentary provisions for assessment and state program develop-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

ment. But in 1990, the EPA promulgated final rules requiring all cities and urban counties with populations greater than 100,000 persons to obtain a NPDES permit for their stormwater discharges. These rules require that pollutants in urban runoff be controlled to the "maximum extent practicable" (Federal Register 1990). Agricultural runoff, however, is currently unregulated but is addressed in the final coastal zone management guidance released by NOAA in early 1993.

Industrial Pre-Treatment. Especially in urban areas, the pre-treatment of industrial wastes before discharge to municipal systems is an important component of the CWA's provisions. Although these provisions have existed since 1972, little was done to ensure their implementation until recently. This recent attention is largely due to growing concern about the effect that toxics from industrial sources has on sludges resulting from the municipal treatment process or on the quality of receiving waters. Nationally, about 12,000 individual firms are covered by federal pre-treatment requirements, while as many as 200,000 are not. Of this latter number, many are subject to local limits which are determined on the basis of the NPDES permit for the treatment facility.

The process of implementing a strategy for protecting the nation's water pursuant to the foregoing statutory principles has been difficult. However, an assessment at the end of two decades of effort would have to conclude that substantial progress has been made. Many water bodies have been improved in their quality. The importance of the issues that need to be addressed in the future, such as nonpoint sources, is now more clearly understood. As this report discusses elsewhere, the economic and technical issues associated with their solution remain difficult in many cases. Nowhere is this more true than for the urban centers of the country that discharge to the nation's coastal waters.

Standards

The question of applicable standards for dischargers remains a crucial issue. One focal point for this debate resides with the discharges of municipal wastewater treatment facilities. The CWA requires that all such plants meet, at a minimum, standards equivalent to secondary treatment. The numerical standards for biochemical oxygen demand and total suspended solids, which EPA as adopted as defining secondary treatment, were derived from a study of the effluent characteristics of approximately 80 typical sewage treatment plants (STPs). Thus, the secondary treatment requirement was essentially a technology-derived standard as was required by the statutory language of the 1972 CWA. However, if water quality considerations for the water body to which the STP discharges require it, then even higher

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

levels of treatment (advanced wastewater treatment such as nutrient removal) might be imposed. With approximately 12,000 municipal plants having achieved secondary levels of treatment, the question now remains as to whether water quality requirements will require general application of advanced treatment.

A second focal point of the standards debate has to do with the development of new standards in areas that Congress has determined to be of importance. These include toxics, bottom sediments, and protection of biologic resources. The system for development of these standards is not technology based. Rather, it is driven by the CWA statutory language to "restore and maintain the chemical, physical, and biological integrity of the nation's waters." The process of setting water-quality standards consists of two steps. First, criteria documents that set forth basic numerical and other characteristics are prepared by the EPA for a particular constituent. These criteria are then applied by the states to develop specific standards for particular bodies of water.

To date, criteria have been established by the EPA for about 135 chemical pollutants. Unfortunately, this has not resulted in the wide-spread development of water quality standards. The states have been slow to undertake the standard-setting process. In addition, no criteria documents exist for many toxic or hazardous chemicals, and the criteria that do exist may not be applicable in marine environments or may inadequately assess impacts on living resources.

Specific Urban Issues

Waivers and Variances. There are a number of provisions for variances from the requirements of technology- or water-quality based standards contained in the CWA. These include: 1) economic variances for cases where modified requirements represent maximum use of technology within the economic capability of the owner/operator; 2) water quality variances from BAT limitations for ammonia, chlorine, color, iron, and total phenols; 3) marine discharge variances from secondary treatment requirements; 4) innovative technology variances from BAT/BCT (best conventional pollutant control technology) deadlines for toxic, conventional, or non-conventional pollutants; 5) fundamental difference variances from BAT/BCT/NPDES guidelines where a permittee can demonstrate the existence of a situation that is fundamentally different from factors considered in establishing effluent guidelines; and 6) cooling system variances for thermal discharges.

For coastal urban areas, the marine discharge waiver provision first appeared in the 1977 amendments (section 301(h)). Although waiver applications were accepted for only a short time, this section remains enormously significant for coastal wastewater management. The EPA agreed to

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

grant waivers where the applicant could demonstrate that a discharge to marine waters with less than secondary treatment could meet a number of criteria including preservation of a "balanced and indigenous" population in the aquatic environment. Absent this showing, the municipal system was required to provide secondary treatment. While some 25 percent of all waiver requests were ultimately granted, the fact that several large systems such as Boston and San Diego have been unsuccessful in securing waivers continues to promote controversy.

Complexity. Urban systems, even as traditionally understood, are not simply characterized by STPs treating domestic sewage. They also consist of large combined stormwater and wastewater collection systems—resulting in a series of combined sewer outfalls. Many firms with manufacturing process waste discharge their effluents directly to the municipal sewerage system. Finally, there are separate stormwater collection systems that discharge directly to water bodies.

The response of the regulatory system to each of these problems has been varied. In the case of CSOs, the major issue has been that Congress has not provided funding for controlling the impact that these systems have on receiving waters. Even in the absence of such funding, the polluting impacts of CSOs are increasingly coming under regulatory control (e.g., in Boston, Chicago, and Washington, D.C.). And for stormwater systems, the 1987 CWA amendments provide a separate system of standards and permits that will require control of the quality of the effluent from these sources.

New Issues

Toxic substances and nonpoint sources of pollution remain of serious concern. Accordingly, provisions of the 1987 Amendments established new procedures for evaluating toxic effects in receiving water from both industrial and municipal discharges. In a similar way, concern over nonpoint source discharges resulted in new provisions of the CWA. In both cases, it is too early to know how these provisions will influence local control strategies.

Nonetheless, it is clear that the constellation of environmental challenges facing urban governments has become much greater. The reach of the CWA is far greater and the dimensions of the problems are more severe.

Assessment

The complexity of the pollution sources affecting the marine environment, especially in urban areas, is extraordinary. Necessarily, the statutory scheme which has evolved over the past two decades reflects this complexity. The command-and-control system of the CWA has brought most dis-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

crete sources under regulatory control, and this has resulted in a reduction of pollutants discharged to the marine environment. However, it is uncertain that remaining issues such as toxic contaminants and nonpoint sources can be effectively managed through this approach. It is also unclear whether the sheer numbers of sources that may need to be controlled, perhaps as many as one million, can be subjected to a regulatory system of this kind.

The EPA has attempted to address this problem through a fundamental re-examination of its approach to pollution control. The report of its Scientific Advisory Board entitled Reducing Risks seeks to re-orient programs so that they "address the significant remaining human and ecological threats" (EPA 1990). The principal recommendations are that 1) the EPA should set priorities on the basis of comparative risks and 2) policies should seek to prevent pollution in the first instance rather than treat it. It remains to be seen whether the complexities of the CWA can be restructured to achieve these goals.

Economic Instruments

Economic instruments are management strategies that provide, for the purpose of environmental improvement, monetary incentives for voluntary, non-coerced actions. Economic instruments do not specify any particular action; they merely encourage certain desired behavior. The central argument for use of economic instruments is that they tend to minimize the cost of achieving any particular level of pollution abatement. This can be illustrated—in an ideal case—by comparison to command-and-control measures. Later sections discuss practical limitations on economic incentives and review their performance with respect to other criteria.

If an effluent standard is applied uniformly to all dischargers of a certain contaminant, each must comply regardless of the cost of doing so. Some dischargers may be able to meet the standard at relatively low cost while others, especially those who have already implemented substantial abatement, may face high unit costs. This situation indicates that the same result could be achieved at lower total cost. Higher removal rates could be required from those who can do so at low cost and relatively less removal from high-cost dischargers.

As low-cost dischargers increase treatment, the marginal cost of abatement (the incremental cost of removing another unit of pollutant) increases. Similarly, as high cost dischargers reduce treatment, their marginal cost falls. So long as some dischargers face marginal abatement costs that are lower than for others, total cost can be reduced by reallocating abatement requirements from high-cost to low-cost dischargers. Total abatement cost is minimized, for any selected environmental target, when each discharger experiences the same marginal cost of abatement.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Under the command-and-control approach, it is possible to modify the uniform discharge standard to reduce total abatement cost. This is done by allocating abatement requirements in inverse relationship to marginal abatement cost. The EPA notes that such regulations ''are difficult to design because they require detailed understanding of the costs and benefits of numerous activities" (EPA 1991). Furthermore, it is not clear that the public and dischargers would accept the resulting non-uniform policy as effective and fair.

The same cost-effective result can be achieved by providing dischargers with an economic incentive to reduce pollution, such as a uniform tax that applies to all units of pollutant discharged to the environment (effluent tax). In this case, each discharger is motivated to reduce emissions so long as the cost of discharge (the effluent tax) is greater than the marginal cost of treatment. Cost-minimizing dischargers will increase treatment level until marginal treatment cost rises to equal the effluent tax. Since every discharger equates marginal treatment cost with the same uniform effluent tax, the result should be equal marginal treatment costs, implying least total cost. This is true regardless of the quantity of pollutant removed. If the environmental goal is not met, setting a higher effluent tax causes total removal to increase, although still at least cost. The regulator does not necessarily require any information on abatement cost functions, and the policy is applied uniformly to all dischargers.

In addition to promoting cost minimization, economic incentives offer other advantages over the results of conventional command-and-control regulation. They encourage technological progress by creating "a permanent incentive to further abate pollution" leading to "a permanent inducement to develop more efficient clean-up or preventive technologies." (OECD 1989) Furthermore, economic incentives distribute responsibility for abatement cost fairly, provide needed flexibility in implementation, and exploit opportunities for environmental improvement that may be unknown to regulators or beyond the reach of conventional command-and-control regulation (Boland 1989).

Types of Economic Incentives

At the most elementary level, economic incentives can be divided into those that induce desired behavior by offering a subsidy and those that discourage undesirable behavior by levying a charge. In practice, however, applied and proposed incentives exhibit considerable variety in form and various other useful distinctions. The following paragraphs describe some specific types of incentives, following a framework adapted from the work of Bernstein (1991).

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

Effluent Charges. The regulator levies fees based on the quantity and/ or quality of pollutants discharged to the environment. The fee is levied on each unit of discharge, so that the polluter has an incentive to take any steps that would reduce discharge. The level of the tax may be set according to some measure of incremental environmental damage, or it may be adjusted so as to achieve the desired environmental quality. In the United States, effluent charges have been applied to some solid waste streams. A recent innovation is the use of volume-based charges for municipal trash disposal. These charges can be collected through the sale of mandatory trash bags (Perkasie, Pennsylvania), by selling stickers that must be placed on bags or other trash items (High Bridge, New Jersey), or through yearly subscriptions for collection of a maximum number of trash cans (Seattle, Washington) (EPA 1991).

User Charges. This measure is usually applied by public wastewater treatment systems. Those who discharge waste into the facility are charged on a unit basis for the quantity and/or quality of the waste discharged. The charge is typically set on the basis of capital, operating, and maintenance costs of the system. One survey reports charges to industrial dischargers ranging from $0.22 to $3.56 per 1,000 gallons of water used, with additional charges for suspended solids and/or biochemical oxygen demand in 97 out of 120 utilities surveyed (Ernst and Young 1990). The user charge is equivalent to an effluent charge for individual generators of waste, as well as a revenue source for the system operator.

Product Charges. Where the production and consumption of certain goods are associated with pollutant releases to the environment, the use of such goods may be discouraged by levying a tax on either the final product, or some input used in its production (feedstock tax). Even where such charges are relatively modest, they may be sufficient to encourage consumption of substitute, less polluting goods. The Superfund program for managing abandoned hazardous waste sites is funded by a feedstock tax, levied on a number of chemicals frequently associated with hazardous wastes. A number of states tax the sale of new tires (or motor vehicle transfers) to provide funds for scrap-tire programs (EPA 1991). While both of these programs were enacted as revenue measures, not as economic incentives, charges of this kind can potentially influence the volume of waste generated.

Administrative Charges. Government agencies that perform pollutant-related administrative services (registration of pesticides, permitting of waste discharge points, etc.) may charge fees for services rendered. While usually created for the purpose of recovering administrative costs, these charges also serve to discourage, to some minor degree, the polluting activities.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

Tax Differentiation. Where more desirable substitutes exist for polluting products, product charges may be implemented for both goods: a positive tax on the polluting good and a negative tax (subsidy) on the nonpolluting alternative. This policy can be used to create a strong disincentive toward use of the polluting good, while keeping total impact on consumers relatively neutral. Tax credits have been proposed to encourage purchase of equipment for both backyard and centralized yard waste composting and mulching, with the ultimate purpose of reducing community solid waste volume (EPA 1991).

Marketable Permits. Also known as tradable discharge permits, these instruments are similar to discharge permits issued under command-and-control systems: each discharger is required to have a permit for every unit of pollutant released to the environment. In this case, however, the permits may be bought and sold among dischargers. Once a market price for a permit is established, dischargers with low treatment costs will be motivated to sell permits, while high cost dischargers will buy permits rather than invest in further abatement. Marketable permits have been used for some years in the air pollution abatement program. Intrafirm trades have been permitted under the EPA bubble program, while the offset program has encouraged interfirm trades in nonattainment areas. The Clean Air Act of 1990 expands this practice dramatically by relying mainly on tradable discharge permits to effect the mandated reduction in acid emissions from stationary sources throughout the United States. Further applications of marketable permits have been proposed for greenhouse gases, recycled newsprint, lead, and end uses of volatile organic compounds (EPA 1991).

Liability Insurance. Where dischargers can be liable for damages in the case of some kinds of pollutant discharge, there may be a reason to seek insurance against possible future claims. Insurance carriers, in turn, will be motivated to establish premiums and set conditions for such coverage. It is expected that minimization of insurance costs would provide an incentive for dischargers to reduce releases.

Subsidies. Various kinds of grants in aid of construction, low interest loans, tax allowances, and preferential regulatory treatment (in the case of regulated public utilities) have been used to persuade dischargers to invest in abatement facilities or find other ways to reduce pollutant releases. The CWA Construction Grant Program is an example of this type of measure, although it was not intended to provide abatement incentives (the parallel command-and-control structure governed most behavior).

Deposit-Refund Systems. This method requires the consumer to pay a surcharge on a product that is refunded when the product or container is

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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returned for proper disposal. Nine states and various local governments have implemented deposit-refund systems for beverage containers. Maine and Rhode Island use deposit-refund systems to control the disposal of spent lead-acid batteries. Similar mechanisms have been proposed for pesticide containers and used motor oil. Bills introduced in Congress during the 1990-91 session would have required the EPA to design a national deposit-refund system for motor oil (EPA 1991).

Noncompliance Fees. Although enforcement actions are usually considered to be inherently command-and-control in nature, some features are designed to act as economic incentives rather than pure sanctions. Violations of discharge standards sometimes result in fines. These fines are fees levied on non-compliant polluters under a command-and-control system. Where the fines vary with the intensity and duration of the violation, however, they constitute economic incentives, motivating polluters to avoid serious or lengthy violations.

Performance Bonds. A discharger may be required to make a lump sum payment (or irrevocable promise of such a payment) to a regulatory agency, to be forfeited in the case of violation, or ultimately returned in the absence of violation. This technique is generally employed where the possibility of violation is confined to a short time period (e.g., during the cleanup of a site contaminated with hazardous wastes).

Liability Assignment. Where laws and regulations make it possible to hold dischargers responsible for damages that pollutants impose on others, the possibility of such liability is a potent incentive for pollution abatement.

Critique

While economic incentives share some common features, they may be substantially different in other ways. The following sections discuss economic incentives generally, with some indication of differences. Space does not permit a full analysis of each type of incentive, much less of variants and combinations of incentives.

Effectiveness. Economic incentives are generally capable of producing the desired effect, provided that the incentive can be made large enough. However, it is difficult to know in advance how large the incentive must be to produce any given effect. Where detailed cost data are available for most dischargers, it may be possible to set the proper incentive level at the outset. Otherwise, periodic adjustments are made until the desired result is obtained.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Marketable permits constitute one exception to this uncertainty regarding effectiveness. The initial issuance of permits places an upper bound on total pollutant discharge, in the same way that discharge permits issued under a command-and-control system constrain total discharge. Still, the spatial distribution of discharge cannot always be predicted accurately as the buying and selling of permits can move pollutant releases from place to place within the defined market area.

Economic incentives are expected to be become fully effective shortly after implementation (allowing for any needed installation of equipment). For effectiveness to be sustained in the longer term, it is necessary to insure that relative incentives remain unchanged by factors such as price inflation and possible changes in costs of alternatives. Where the level of incentive is set by the regulator (e.g., effluent taxes), indexing and periodic adjustment may be needed. The market-based methods (e.g., marketable permits) adjust themselves; no action by the regulator is needed.

All economic incentives, no less than command-and-control policies, require the existence of effective monitoring and enforcement programs. Effectiveness is undermined whenever failure to perform—associated with a command-and-control regulation or an economic incentive strategy—is unlikely to be detected or, if detected, unlikely to lead to significant penalty.

Efficiency. In the broadest sense, economic efficiency requires that the right level of pollution be identified, then achieved at the least possible overall cost. The right level of pollution is the amount that maximizes net social welfare, considering both environmental damage and the cost of abatement. Economic incentives, as well as other environmental management tools, do not reveal the right pollutant level. Environmental targets must first be set by regulators, then economic incentives can be used to realize them.

Most economic incentives are cost-effective in that they tend to minimize the cost of whatever pollution reduction is achieved. This general result applies to effluent charges, product charges, marketable permits, and others. Cost minimization cannot be assumed, however, in the case of subsidies and enforcement incentives. Individual policies under these categories may or may not promote efficiency; the result depends on the design and conditions of implementation of each application. Only those costs actually borne by dischargers are considered in the course of cost minimization. A municipal wastewater system, for example, has no motivation to minimize abatement costs imposed on others through pretreatment requirements, etc.

Fairness. Economic incentives—with the possible exception of subsidies—may be regarded as fair, since they apply uniformly to all, even if

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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they lead to non-uniform behavior. Some object to these incentives on what may be described as ethical, rather than fairness, grounds. It is argued that measures like effluent taxes permit dischargers to pay for something they should not be allowed to own: the right to pollute. Command-and-control measures, on the other, grant the right to pollute (after abatement targets are met) to dischargers at no cost.

Subsidies are less likely to be perceived as fair. In the first place, they are often applied in a non-uniform manner. Also, they violate a widely held notion of fairness: that the polluter should pay. Subsidies pay the polluter. Abatement actions may be required in order to receive the subsidy, but there is no doubt that the discharger is left better-off than before. On the other hand, the EPA Construction Grant Program, which provided federal subsidies to qualifying local government agencies for the construction of wastewater treatment facilities, was not widely criticized as unfair. This may reflect the fact that subsidies were purely intergovernmental (not available to industrial dischargers) and that the program was large enough and lasted long enough to provide virtually every locality with an opportunity to qualify for one or more grants.

Redistribution of Income. Economic incentives redistribute costs and benefits in various ways. Pollution charges, except for tax differentiation, transfer income from dischargers to regulator (government). Marketable permits may transfer income in the same way or not, depending on how the permits are initially distributed (issued free of charge, auctioned, etc.). To the extent that these permits trade thereafter at their marginal opportunity cost, subsequent transfers of net income are small or nonexistent.

Applicability. Not all economic incentives are suitable for all regulatory tasks. While some are broadly applicable, such as effluent taxes and marketable permits, others are more suited to specific applications (e.g., product charges and deposit-refund systems).

Feasibility. Because economic incentives (except subsidies) have not been widely used, there may be barriers to implementation in many cases. It may be necessary to change federal or state legislation and regulations to implement such measures as effluent taxes or marketable permits. Social acceptability may be an issue for some types of incentives (especially those that appear to reward polluters), while the dischargers themselves may object strongly to others (e.g., effluent taxes). These considerations, in turn, contribute to the presence or absence of the political will to adopt or support a given measure.

Risk. With the partial exception of marketable permits, significant un-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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certainty exists regarding the effect of economic incentives on the level and spatial distribution of discharges. (Marketable permits result in a specified level of discharge.) This reflects the difficulty of predicting how dischargers will individually and collectively react to any given set of economic incentives. Once a pattern of response is established, reactions to changes in the incentive structure can be predicted with greater confidence. Nevertheless, a transition from complete reliance on command-and-control to a substantial role for economic incentives could involve significant uncertainty regarding the initial outcome.

From the point of view of dischargers, economic incentives are also associated with increased risk. Under any system of regulation, dischargers must invest in treatment works and process adjustments, train employees, seek permits, and make other relatively long-term commitments of resources. Under command-and-control regulation, the nature of this investment is known with some accuracy. In the case of economic incentives, however, the least-cost investment strategy depends on the type and level of economic incentive expected, future abatement costs, and other somewhat uncertain data. Dischargers may overinvest (from their perspective) in treatment, or they may underinvest requiring costly future upgrades.

Incentives for Technology Improvement. Unlike technology-based command-and-control instruments, economic instruments preserve the incentive to improve and refine pollution abatement and production technology. Those who are able to improve the efficiency of a pollution abatement process will benefit in a tangible way: the total cost of compliance will be lowered. Dischargers are motivated to innovate in search of such improvements, and developers of new processes will find a ready market. Also, economic incentives do not distinguish between pollutant reductions achieved by abatement technology and those obtained through production process change. In either case, the incentive for innovation and improvement remains. This can be contrasted to the opposite case, technology-based command-and-control regulation, where the only party interested in more effective treatment technology is the regulator: the new technology could form the basis of more stringent regulations.

Feedback/Adaptive Management/Ease of Evaluation. Economic incentives require the same type of monitoring and reporting that is currently associated with command-and-control policies. Opportunities for feedback and the possibility of adaptive management are, therefore, essentially the same. Program evaluation, however, gains an additional dimension. Data on the payment of taxes or the holding of permits provides information on the economic choices faced by dischargers and on the way in which these choices have been resolved.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Prevention Versus Abatement. Pollution prevention is accomplished by seeking alternative inputs, production processes, or products that result in wastes with a lower volume or lower toxicity. Some economic incentives are specifically intended to influence input or product choice (product charges, tax differentiation, deposit-refund systems). Others provide incentives for pollution reduction that do not discriminate among sources of reduction. The economic incentive to reduce one unit of discharge by changing a production process is exactly the same as the incentive to achieve the reduction through abatement technology.

Discussion

Actual economic instruments, in use in the United States and elsewhere, may or may not resemble the ideal designs of the theoretical literature. Practical considerations may dictate modifications and compromises in the scope and form of these regulatory devices. Design and evaluation of regulatory programs incorporating these incentives should give full attention to factors such as feasibility, risk, and acceptability, rather than assuming the inherent superiority of economic instruments.

When economic incentives are used alone, the results are difficult to predict except after some experience and experimentation. This is true even for marketable permit programs, though the uncertainty may be confined to the spatial distribution of discharge. Also, successful application of economic instruments requires the presence of effective monitoring and enforcement programs.

For these reasons, proposals to abandon command-and-control measures in favor of economic instruments are unlikely to be heard, much less adopted. All U.S. experience so far, primarily in the air quality program, is with economic instruments that have been added to existing command-and-control regulations. In this way, economic instruments are able to provide beneficial improvements at the margin without sacrificing the basic predictability and enforceability of the prior system.

Properly used, economic instruments can claim important advantages:

  • They can produce incremental improvements in environmental quality over and above those attainable through direct regulation.

  • Some economic instruments provide a revenue source for self-financing pollution control programs.

  • The total social cost of meeting a given target is reduced; the total cost burden on polluters is also reduced.

  • Economic instruments preserve incentives for technical progress, with respect to both abatement and prevention technology.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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  • Flexibility in enforcement is enhanced without sacrificing environmental goals.

Growth Management

Growth management strategies, utilizing any of several kinds of planning frameworks, offer the opportunity to integrate environmental decision making. Three types of planning frameworks are relevant to wastewater management in coastal areas:

  1. Comprehensive land-use and growth management planning at the regional and state level.

  2. Comprehensive planning for regional water bodies such as bays, sounds, and estuaries.

  3. Single-purpose planning and implementation efforts specifically directed to effective water resource protection.

Planning approaches can offer significant advantages:

  • requiring the integration of land and water resource strategies;

  • addressing natural resources and environmental threats on an ecosystem basis;

  • employing a watershed or drainage area concept;

  • providing a mechanism for overcoming jurisdictional fragmentation;

  • providing the context for setting and acting on priorities; and

  • focusing on the future, providing the basis for anticipating, and preventing, problems.

Planning approaches are essential for successfully controlling nonpoint and urban stormwater pollution problems, and useful for considering point sources and other water quality issues in the context of broad pollution prevention goals. Planning approaches tend to force attempts to overcome the fragmentation and complexity of the institutional setting.

Comprehensive Land-Use and Growth Management Planning

State and regional land-use and growth management planning efforts are being employed in many but not all coastal states. Typical state strategies include:

  • a set of goals and policies, usually adopted by the state legislature, that form a comprehensive planning and implementation system tied together with the concept of consistency (requirements that state, regional, and local actions be consistent with the goals and plans),

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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  • pay-as-you-go requirements, often called concurrency, which call for infrastructure, such as stormwater management systems, to be in place and funded (for example through fees or rates) concurrent with new development activity,

  • anti-urban sprawl provisions, including incentives, disincentives, and design standards to promote compact, people-friendly, and environmentally sound urban development,

  • increased attention to protecting natural resources and environmentally sensitive areas, including farm and forest lands, wetlands, water recharge areas, and wildlife habitat, and

  • goals and policies regarding housing and economic development.

Many of these state and regional growth strategies involve a review of existing programs, such as coastal zone planning and management, and efforts to reinforce and integrate such programs with new comprehensive plans and plan implementation.

Successful implementation of these state growth management systems includes the redesign of state, regional, and local land-use and development permitting systems to overcome their inherently limited, case-by-case reactive nature. Comprehensive and integrated land-use planning and plan implementation have significant relevance to water quality efforts, especially nonpoint pollution control and prevention.

Perhaps the most important feature of recent planning strategies, in sharp contrast to past attempts, is that the best of them are enforceable, binding, and mandatory. As a result, they offer consistency in approach both vertically (through each level of government) and horizontally (across programs at each level of government) and thus offer a good mechanism for addressing coastal water-quality problems.

Comprehensive Planning for Bays, Sounds, and Estuaries

In many coastal states, comprehensive strategies are being tried to protect bays, sounds, estuaries, and other near-coastal waters. Some of these plans are being conducted under the auspices of the National Estuary Program, a provision added in 1987 to the federal Clean Water Act.

These planning and implementation programs bear many similarities to comprehensive land-use and growth management strategies, because of the close tie between population pressures and the most significant threats to these water bodies. For example, stormwater management is a significant feature of both types of approaches, and many of the essential features of growth and land-use plans, such as confining urban sprawl and protecting environmentally sensitive areas, have direct benefits to water quality and marine resource protection.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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By focusing on a regional water body, the regional ecosystem becomes the integrating factor in the management plan, and the basis for setting and implementing priorities. All of these programs address entire watersheds rather than looking only at activities on or near the marine shoreline.

Like comprehensive land-use planning, the biggest challenge to these estuary and near-coastal management plans is whether they will, in fact, be implemented. Both enforceability and funding are lacking in the National Estuary Program, and states have varying levels of commitment to moving from planning to implementation. Substantial political will, as well as funding, will be required to make even the most well thought out of these plans a reality.

A typical estuary plan addresses these issues:

  • rapid and continuing population growth in the basin and the commensurate need to tie land use, transportation, and water quality programs together;

  • jurisdictional fragmentation and the need to overcome turf concerns;

  • significant gaps in scientific research and monitoring related to the regional ecosystem and the effects of pollution;

  • the need to broaden the scope of traditional water quality programs, for example, the need to address accumulations of toxic metals and chemicals in sediments underlying the water column;

  • the need to address many problems simultaneously in view of the absence of any one dominant threat to water quality;

  • the inadequacies of existing water-quality programs, including the NPDES permitting process; and

  • the need to sustain political support for implementing complex, long-term plans in the absence of a steady flow of new crises and catastrophes.

It must be recognized that to be successful, these regional water body plans must be living, iterative processes tied to good monitoring and measurements of progress. These are truly long-term projects—in some respects never-ending—in that most of the action strategies involve continuing management responsibilities as much or more than they rely on one-time capital projects.

Institutionally, oversight and coordination responsibility for water-body plans needs to reside somewhere with a strong combination of visibility, objectivity, and political clout.

Improved Water Resource Planning and Management

Even in the absence of comprehensive planning strategies, single-purpose resource agencies can accomplish a more integrated—and thus more effec-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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tive—system in one functional area. Florida's Regional Water Management Districts and California's Water Quality Control Boards are examples.

Florida's Regional Water Management Districts are organized along watershed lines; they have their own taxing authority, and they possess both planning and regulatory powers extending to both water quantity (primarily) and water quality (increasingly). Much has been accomplished by these agencies as their authority has been expanded to coastal and estuarine waters in recent legislative sessions. Yet there are land-use and other linkages that need to be strengthened.

Florida is discovering that it is difficult to integrate established and powerful systems such as its water management districts into its new comprehensive growth strategy. A renewed effort in that direction has the strong support of Governor Chiles and shows strong evidence of success.

Evaluating the Planning Tool

The planning tool can be held up against evaluation criteria as follows:

Effectiveness—Planning strategies are more effective in the long term than in the short term and are virtually ineffective in the absence of long-term commitments of funding, political will, and institutional capability. With such enforceability and support, planning strategies can be extremely effective and offer the best hope for controlling nonpoint and stormwater pollution problems and the best way to consider the wastewater treatment issue as part of a bigger picture.

Efficiency—Because planning strategies offer an opportunity to set and implement priorities in a broad context, they should result in efficient implementation expenditures. However, they can also be time consuming and slow to develop and implement and can be derailed at any time, risking the loss of initial investments in the planning strategy.

Fairness—Plans tend to be formulated and adopted in public processes where issues of fairness are at least exposed and evaluated and often used as a major criterion for decisions.

Redistribution of income—As with the less objective criterion, fairness, planning strategies usually expose issues of costs and benefits as well as who pays and who benefits. The comprehensiveness and complexity of plans, however, can detract from the analytical rigor of this issue as it might apply to any particular project or action.

Applicability—Planning is most applicable to long-range, multi-factor problems and in the water quality area is absolutely necessary for solving nonpoint and stormwater concerns, for setting priorities among water quality choices, and for taking an ecosystem approach to protecting coastal areas.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Feasibility—Planning is usually feasible, whereas plan implementation depends entirely on political will, sustained funding, and long-term institutional capability. These factors are highly variable.

Risk—Planning strategies tend to minimize risk if they are set up with adequate monitoring, evaluation, and course-correction provisions.

Incentives for technology improvement—Planning strategies per se are neutral with respect to technology improvement. The effect of any particular plan could be positive or negative with respect to innovation.

Feedback/adaptive management/ease of evaluation—Planning strategies excel in feedback and adaptability if they are structured as ongoing, iterative processes (as they should be).

Prevention versus abatement—Planning strategies are an excellent—perhaps the best—mechanism for developing and implementing prevention strategies. Abatement strategies are also suitable ingredients of plans but can be accomplished well in other ways.

Integrated versus single medium strategies—Planning approaches are the best hope for achieving integrated strategies and tend away from single medium strategies.

Single versus cumulative impacts—Planning strategies by definition look at the big picture, moving beyond case-by-case approaches to consideration, anticipation, and action relative to cumulative impacts.

Conclusion

Planning as a tool is essential for improving water resource management itself and for integrating water quality considerations with other environmental and natural resource objectives. It is also a good mechanism for structuring and implementing decisions and management strategies for regional water bodies in coastal areas. Without a planning approach, nonpoint and stormwater management pollution problems will not be solved, and specific water-quality decisions of any sort, including point source treatment decisions, cannot be made in the context of comprehensive strategies and priorities. There are disadvantages of planning strategies: they are time-consuming and can at times delay needed action; they can result in centralized schemes that hinder creativity and flexibility; they impose costs on some and create windfalls for others; they can raise expectations and then dash hope when plans are not implemented. Implementation is the usual pitfall of most planning strategies, a problem which needs to be addressed at every stage of any such process.

Education

Individual decisions, most of them beyond the direct reach of regulatory strategies, greatly affect water quality. Such decisions are made every

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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day by corporate employees, consumers, householders, and government employees. They include the purchase, use, and disposal of petroleum and other hazardous chemicals; the selection, maintenance, and use of machinery and other equipment; the uses and abuses of urban, suburban, and rural landscapes; and decisions about consumer products ranging from wasteful and resource-intensive ones to essential and resource-conserving ones.

Nonpoint source and pollution and stormwater contamination are caused in large part by myriad, individually insignificant actions. Similarly, discharges into municipal wastewater systems are made up of much more than human sewage: other contaminants, including significant amounts of toxic chemicals, are the product of a multiplicity of everyday decisions by individuals and companies.

Even in industrial facilities subject to point source NPDES permits, individual decisions about equipment maintenance, raw materials, and processes, while ideally made within the parameters of sound permitting requirements, have an important and varying impact on the nature and amount of actual discharges.

Trained environmental professionals are in demand in both the private and public sectors, and the need for basic environmental literacy among the public is increasingly apparent, as it is expected that both professionals and the public grasp the relationship of multiple actions and factors and act on that understanding.

Education, therefore, is absolutely necessary as a part of any solution to water quality problems. Education includes a wide range of content, from the most general and simple to the most technical and complex. Similarly, the audiences to be reached range from the general public to students in academic settings to specific employee groups in particular industries. Audiences include children, public officials, treatment plant operators, and water quality regulators. In this broad context, technical assistance, technology transfer, public service messages, hands-on stream rehabilitation, and school curricula are all examples of strategies for water quality education.

Education Strategies

Water quality education has, in general, enjoyed little emphasis. Government agencies have gravitated toward the brochure strategy, which in fact is no strategy at all. Effective education is a form of marketing—audiences, messages, targeting, media, and saturation are key concepts in designing a program to modify people's behavior. Effective education is also an essential component of maintaining public support for water quality programs.

Education programs can and do miss the mark. The most helpful and

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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accurate brochure will have no effect if the target audience 1) doesn't get it, 2) doesn't read it, or 3) isn't motivated by it. An in-person training program for technical people in an industry will be a waste of time if 1) the person presenting the information is not credible to the audience; 2) the information isn't tailored to the specific real world of the particular business; or 3) the purpose of the education is to change the policies of management, rather than to change the behavior of the people in the room. Academic programs can exacerbate fragmentation in solving water quality programs by emphasizing information and omitting learning strategies that might broaden context and assist in integration.

On the other hand, education can be extremely effective. Good information, presented at the right time in the right form, can change behavior, avoid battles, empower people, and prevent pollution. Encouraging peer-to-peer education can overcome the credibility problems invariably encountered when government tries to educate business people. Funding citizen involvement programs such as labeling stormdrains can do double duty—addressing a specific water-quality problem while building a more general environmental ethic. Education can also overcome the confines of compartmentalized regulatory programs by integrating environmental information and strategies. Academic curricula can teach both environmental responsibility and technical competence in a real world context.

A comprehensive water-quality education strategy would include at least the following:

Technical assistance and technical training—Working through industry and technical/professional associations is especially effective in conveying technical information to targeted audiences. Regulatory programs have generally not proven to be sufficient conduits of technical assistance or training.

Technology transfer—This term refers to methods and approaches as well as to hardware and treatment or manufacturing processes. Most technology transfers occurs informally but can be hastened by conferences and well-thought-out dissemination of information.

Targeted audiences—This concept starts by thinking about the audience rather than the government agency and its program. It asks, ''If I owned a dry cleaning establishment or if I were a resident in this watershed or if I were a mayor in this region, what would I need to know to protect water quality or the environment more generally? And how would I learn it?" With this perspective, effective and efficient education strategies can be developed, but only if the educator is up to the challenge of cutting across bureaucratic lines.

General audiences—Messages to general audiences require effective use of mass communication methods, including sufficient saturation to ensure that the messages have an impact. General awareness information (for

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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example the value of marine ecosystems) and information applicable to virtually everyone (what to do with waste oil or paint thinner) require such methods.

Water quality education in the schools—Excellent water quality and other environmental curricula exist for use in schools. They are most effective when adapted to specific local places and issues and teachers are trained in their use. Both of these needs require resources. Basic environmental literacy is an even more important curricula goal than any specific topic; water quality curricula tend to be good for this goal, given the over-arching nature of the question "what affects water quality and how can we protect the water"?

Technical and scientific training in higher education—Integration rather than compartmentalization of technical/scientific education is crucial for the next generation of environmental professionals. Academia needs to address the companion (yet often competing) objectives of producing both big thinkers and competent specialists.

Public involvement linked to education—Hands-on projects for volunteers, such as stormdrain stenciling projects, beach clean-ups, restoring streams, and replanting anadromous fish, can educate while simultaneously accomplishing a direct environmental purpose. Such projects are very low cost, and will flourish with some governmental or private seed money.

Pollution prevention programs—Agencies and business associations are increasingly emphasizing "pollution prevention pays" and the technical information to encourage source reduction. Because most regulatory programs focus on the end of the pipe, prevention has largely stayed in the province of education, although, ideally, regulatory pressure and education would work together to achieve prevention.

Examples of Education Strategies

There are examples of efforts to address water quality with effective education strategies. Notable is the Public Involvement and Education (PIE) Fund of the Puget Sound Water Quality Authority in Washington State. Over a period of six years (the program is ongoing), $3 million in small grants have been applied to diverse model education projects sponsored by non-profit organizations, trade associations, local governments, tribes, schools, and others. Projects have ranged from creative (story-telling and song projects) to mundane (manuals and workshops) and have reached a large percentage of the residents of the Puget Sound Basin in some way.

The program has pioneered the concept of peer-to-peer education as an alternative to standard agency or academic training or public information programs. An example of this strategy: The Associated General Contractors of Washington were funded to work with their own members to develop

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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a practical handbook and workplace poster addressing the everyday water-quality problems confronted on the front lines of their business (how to handle fuels, solvents, and other common toxicants; who to call with a question about hazardous waste; tips on erosion control during construction; etc.). The unique and effective aspect of this project was not the content but the fact that it was presented to the members by a credible source (their own trade association) in a language and format specifically designed around how they work and who makes what decisions on the job. Similar peer-to-peer projects have been carried out with the automotive repair industry, the dairy industry, horse owners, and others.

The program has also demonstrated the value of linking hands-on activities, such as cleaning up a stream or beach or taking water quality samples, with broader educational objectives, such as "how can I as a citizen take care of our water resources?" or "what are all the threats to this watershed, and what needs to be done"?

Above all, the PIE Fund program has shown that a small amount of money directed at existing organizations with already established audiences, networks, and programs can have a magnified effect. The largest PIE grants have been under $50,000, and most have been far less.

In academic settings, there are also signs of progress. The EPA has funded programs at the University of New Orleans and Tufts University. The latter is building environmental material and awareness into curricula throughout the university as an alternative to creating a separate specialty in environmental studies. The former incorporates many programs of the PIE-Washington State program into a comprehensive urban wastes control program. Several states, including Washington, have now added environmental education to the basic K-12 curricular requirements.

Challenges and Issues

Accomplishing improved water quality through education—while generally considered non-controversial—in fact is a strategy hindered by significant challenges. For example:

  • Where is the line between information or education and propaganda? To motivate behavior and attitude changes, persuasion techniques and value-laden content are essential ingredients. In addition, general audiences need simplified information, which of course can be challenged by experts.

  • Where will the funding come from for significantly increased environmental/water quality education programs? While usually afforded lip service as important, environmental education programs are rarely afforded high budgetary priority.

  • Can higher education science and engineering programs effectively

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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train both specialists and interdisciplinary scientists and managers? Traditional science and engineering education rewards or even demands intense specialization, but solving environmental problems also demands scientists and engineers who can cross disciplines with facility and competence.

Evaluating Education as a Tool

Effectiveness. Generally speaking, education is more effective in the long term than in the short term, especially education aimed at building an environmental ethic in our society. However, the reverse may be true for specific, targeted messages; there may be only a short-term positive effect in behaviors and attitudes. For example, people may refrain from disposing of oil or other hazardous chemicals into stormdrains during and shortly after an intensive education campaign but may not sustain that behavior over time. Similarly, technical assistance and training can have very immediate effect but must be an ongoing process to address new employees and new problems. Many of the positive effects of education are hard to quantify and evaluate, and thus their effectiveness may be questionable.

Efficiency. Education is not free, but it is inexpensive compared with capital investments. As noted above, effectiveness is sometimes hard to measure, and most water-quality education efforts are not rigorously evaluated with respect to actual changes in behavior or improvements in water quality (although participants in education programs are routinely asked to provide their own evaluation), making assertions about cost-benefit relationships impossible.

Fairness. Water quality education could be judged unfair if funding were distributed inequitably or if education were perceived as a substitute for enforcing pollution control laws. The content of water quality education is sometimes criticized for singling out certain polluters or for implying that the individual bears all the responsibility for pollution (as opposed to industry or government). But overall, education is usually applauded as an important, and presumably fair, strategy.

Redistribution of Income. This could become an issue with respect to how water-quality education programs are funded, although the amounts of money (and thus the significance of the issue) are not likely to make this a major concern.

Applicability. Education is uniquely suited to address nonpoint pollution, stormwater contamination, and pollution prevention and to achieve an overall environmental consciousness linking air, water, land, and other en-

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

vironmental issues. Education is an important adjunct to regulatory and planning strategies.

Feasibility. Education is one of the most feasible and least controversial strategies for addressing water quality. However, it is often seen as a frill when budgets are prepared. Education efforts are also often assigned to staff who are not trained or qualified to perform that kind of job. For example, the NPDES permit writer/inspector may be expected to provide technical assistance to the discharger, or the environmental engineer may be expected to train the citizen watershed action team. In schools, the major feasibility issue is the ability to provide teachers the time to learn new curricula.

Risk. Education is a low-risk strategy. The amounts of money are generally not large, and the programs can be modified along the way.

Incentives for Technology Improvement. Technology transfer and pollution prevention programs may be very effective ways of encouraging technology improvement, especially if the education can point to economic and reliability advantages of the improvement.

Feedback/Adaptive Management/Ease of Evaluation. Education programs are often evaluated by the participants and are usually easy to adapt. Exceptions to this are school curricula that become out of date but continue to be used and the difficulty of quantifying the actual effect of education on water quality.

Prevention Versus Abatement. Education is an essential part of pollution prevention efforts and is an adjunct to abatement strategies.

Integrated Versus Single Medium Strategies. Education can apply to single medium strategies but is particularly well-suited to integrating environmental information. For example, a good technical assistance program targeted to a particular industry will take a top-to-bottom approach to the facility, looking at all of the environmental issues and opportunities for pollution prevention.

Single Versus Cumulative Impacts. Education can occur on many levels and is especially important for problems like nonpoint pollution or pouring toxicants down the drain, where cumulative impacts are the issue.

Conclusion

Education is an essential component of water-quality protection strategies. There are excellent pilot and model education projects which should

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
×

be emulated. Academic programs, advocacy, and education directed toward changing attitudes and behavior are all different and valid components of water quality/environmental education. Its priority has traditionally been very low, however. To deal effectively with nonpoint pollution, stormwater management, toxicants in the municipal treatment system, and pollution prevention strategies, it will be crucial to increase education and public involvement expenditures and other resource commitments. Basic environmental literacy and improved specialized education are also important aspects of an education strategy.

FINANCING MECHANISMS

Introduction

The costs of wastewater management expenditures are borne, in the first instance, by government agencies and private enterprises. In a typical year, the private sector pays directly about two-thirds of the total cost of wastewater management. (In 1988, the business community spent $21.6 billion for water pollution abatement and control, compared with a total expenditure—including regulation, monitoring, and research—of $33.2 billion [Bureau of the Census 19911). Private sector outlays are financed by increases in product prices and reduced corporate profits. Taken in the aggregate, these changes are small: in 1988, the private sector expenditures for water pollution control were equivalent to less than one percent of total personal consumption expenditures, or about three percent of business profits (Bureau of the Census 1991). Nevertheless, even small changes in prices and profits can potentially influence rates of price inflation, industrial output, employment, and international competitiveness. Examination of these impacts is beyond the scope of this study.

Of more immediate interest, due to its close relationship to the effectiveness of management strategies, is the financing of government expenditures for wastewater management. Most financing decisions are the responsibility of the individual operating agency, whether local or regional in scope. Typically, financing occurs in a decentralized manner, even when compared with other local government programs. Participation of state and federal government is ordinarily limited to the provision of grant and loan programs, which may or may not be available at a particular place and time. Tax and fiscal policies of local and state governments generally have little or no influence on the financing strategies adopted by wastewater agencies.

In developing a financing strategy, wastewater management agencies may consider a number of objectives, including:

  • revenue adequacy,

  • minimum financing cost,

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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  • minimum total cost,

  • acceptable cash flow profile,

  • minimum financial risk,

  • acceptable incidence of cost on benefitted population,

  • flexibility with respect to future financing decisions, and

  • public and political acceptability.

At least five major sources of funds may be considered:

  • general taxes,

  • dedicated taxes,

  • user fees and charges,

  • intergovernmental transfers, and

  • debt financing.

Within each of these categories, there are numerous variants and alternatives. The following paragraphs discuss some of the more common financing instruments, contrasting their positive and negative aspects. Possible economic impacts of financing strategies are also reviewed.

Financing Alternatives

The number of unique financing methods available to wastewater management agencies is very large. Numerous variations of each general type of method are possible; a number of different financing methods can be combined, either in parallel or sequentially, to produce an overall financing strategy. The following paragraphs describe the basic types of methods, without discussing any of the possible variations.

General Tax Revenue

This category includes all revenues derived from non-dedicated taxes and received into a government's general fund. The taxes most often levied by local governments include real property taxes, sales taxes, local income taxes (sometimes consisting of revenue-sharing with a state income tax, called piggy-backing), and excise taxes levied on specific commodities or activities (since these taxes are often levied on consumption or sale of alcohol, tobacco, etc., they are called sin taxes). In addition, some local governments levy taxes on utilities, business franchises, business inventories, etc. Since these revenues are placed in the government's general fund, they are made available to wastewater management activities by the local legislative body through the normal process of appropriation. This is a straightforward and familiar process with few financing costs. However,

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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local taxes are often politically unpopular and difficult to increase. Wastewater management competes with other local programs for a share of an effectively fixed revenue source.

Dedicated Taxes

It is also possible to levy specific taxes for the purpose of financing wastewater management. The revenues from these taxes do not flow into the general fund but are placed in a trust fund; they can only be withdrawn pursuant to an appropriation to wastewater management activities. These dedicated taxes may be levied on activities thought to contribute to water pollution costs: e.g., on value of manufacturing industry shipments. Where taxes or effluent charges are levied on pollutant discharges, it is common to dedicate the resulting revenues to wastewater management purposes.

The use of dedicated taxes has the advantage of insulating wastewater management from the tax and spending policy controversies surrounding general fund transactions. On the other hand, special legislation is usually needed to create dedicated taxes and their associated trust funds. Since the taxes are often narrowly focused, those who will be taxed may be expected to oppose their adoption.

User Charges

User charges differ from taxes in an important way. Taxes are levied on various kinds of property or activity and cannot be avoided short of disposing of the property or ceasing the activity. User charges are payments required in return for services provided—in this case, by the government. User charges are paid only by those who receive the service; anyone who elects not to receive it is not required to pay. Where possible, user charges are proportionate to the service provided. User charges are, therefore, avoidable.

The most common wastewater application of this financing mechanism is the user charge levied on individual residences, businesses, and institutions for wastewater service. This charge applies only to those actually connected to the collection system and receiving services. In most cases, the charge is based on water use, an approximate measure of the quantity of wastewater services provided. Fees for permits or special services are also user charges.

User charges are generally more acceptable to the public than comparable taxes, and they have advantageous economic characteristics (see below). From the wastewater agency's perspective, user charges involve identifiable financing costs (costs of billing, collecting, etc.) and constitute a

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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less stable source of revenue than taxes (user charge income fluctuates with changes in the use of the related services).

Intergovernmental Transfers

Intergovernmental transfers of funds, or subsidies, may be provided for general purposes, or they can be dedicated to specific activities. Revenue sharing programs are often general purpose in nature, where a state or federal government simply transfers some amount of money from one general fund to another. These funds are appropriated in the same way as other general funds, derived from local taxes. Some revenue transfers may be nonspecific but restricted to a class of purposes, such as federal block grants.

Other transfers are made for a particular purpose, and the funds are restricted to that purpose. State and federal grants for wastewater treatment plant construction constitute intergovernmental transfers of this kind. Grants or fund transfers may also be made to support local or regional regulatory and monitoring programs.

Transfers are attractive to local governments and wastewater agencies, since they involve no local sacrifice and are relatively free of financing cost. For these reasons, they are politically popular at the local level. However, just as they require no local legislative action, they are not subject to local control and may appear and disappear unpredictably, without regard to relative need.

Debt

Another option is the possibility of meeting wastewater management costs with borrowed funds. This has the effect of transferring the financing requirement from the present to the future. A local government or agency may borrow funds on a short-term basis, usually through commercial banks, or for the long term through the issuance of bonds. Long-term borrowings include mortgage bonds (secured by physical assets, not often used by governments), revenue bonds (secured by anticipated future revenue from user charges, fees, and taxes), or general obligation bonds (secured by the full faith and credit of the issuing government). Revenue bonds may be issued by most wastewater utilities organized on an enterprise basis, with some degree of financial autonomy, while general obligation bonds can only be issued by a general-purpose governmental entity (often subject to voter approval).

The use of debt allows an agency to spread the financing of capital outlays over time, producing more uniform and manageable annual cash requirements. Financing costs may be significant, however. Issuing bonds

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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involves one-time underwriting, placement, insurance, and legal costs. Interest must be paid over the life of the bond at rates that may later diverge from the current opportunity cost of capital to the utility. Also, there are market-enforced limitations on the total amount of debt that a particular agency can carry; attempts to increase debt beyond this point will greatly increase the cost of borrowing.

Financing costs are sometimes reduced by subsidies from other levels of government. For example, many states have recently created revolving loan funds with federal assistance. These revolving funds will make loans to local agencies for wastewater treatment plant construction at interest rates and overall financing costs that are less, in general, than those available in the market. The cost savings can be interpreted as an intergovernmental transfer, or subsidy.

Economic Impacts

The choice among financing methods depends upon the relative advantages and disadvantages of each in particular situations. Some of these characteristics, such as the suitability of the cash flow profile or the public and political acceptability of a given strategy, are difficult to generalize. Others derive from the inherent economic impacts of the financing method, as described below.

Revenue Adequacy and Stability

The primary objective of a financing method is that it produce the necessary funds. The requirement is so basic that it seems unnecessary to mention it. Yet it is not always clear that a particular method will, in fact, produce the necessary revenue or that it will do so reliably. Some revenue sources, for example, may increase or decrease in response to external factors. Dedicated taxes may vary with changes in the taxed activity; user charges fluctuate with changes in economic activity, population, or tariff level; intergovernmental transfers may be subject to reduction or discontinuance in times of fiscal stress.

Where variations in the revenue flow are accompanied by changes in financing requirement, as is the case where revenue is derived from user charges and the service area population changes, the indicator of interest is the net revenue (total revenue less total costs). Instability in net revenue can require costly supplemental financing or precipitate a fiscal crisis. Other revenue sources may vary independent of revenue requirements. In any of these cases, the result is financial risk, which must be balanced against other factors in choosing a financing method.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Cost Incidence

Each financing method results in a particular distribution of cost allocation among individuals and organizations and across time. General taxes allocate costs in accordance with the nature of the tax base (e.g., according to real property value). Increases in user charges allocate costs in accordance with water use; debt instruments allocate present costs to future time periods (the nature of the cost incidence in the future depends on the method used to finance the debt service payments). Intergovernmental transfers allocate most costs to residents of other political jurisdictions.

Public and political acceptability of particular methods is influenced by the resulting cost incidence and the perceived fairness of that distribution. Property owners may regard general fund financing as unfair since costs fall on all property owners regardless of use of the wastewater system, and owners of high-value property may pay a relatively large share of the costs. Dedicated taxes, especially those levied on activities or commodities unrelated to wastewater production, may be regarded as unfair. Intergovernmental transfers may be seen as unfair by residents of non-benefiting jurisdictions.

Incentives for Efficient Management

Wastewater management is a service performed for those who generate wastewater as well as those who may benefit from improved quality of the receiving water body. Where the costs of wastewater management are allocated, via the choice of financing mechanisms, to activities and entities who neither contribute to or benefit from the service, there is little incentive for management agencies to improve the efficiency of operation. This is also true when the funds are raised through taxes, even though those who pay the tax may benefit. Their tax liability remains the same regardless of the presence or absence of the benefit.

User charges have a very different characteristic. User charge revenue is the result of voluntary payments for wastewater management services: if the service is not provided, no payment is made; if the service is too expensive, less will be used; if less service is provided, less revenue will be obtained. User charges, alone among the revenue sources discussed, create an incentive for management agencies to provide the service in a cost-effective way. In many cases, the incentive may be weak, especially when compared with the more competitive private-sector industries, but it can promote some degree of efficiency in the operation of wastewater agencies.

Suggested Citation:"E POLICY OPTIONS AND TOOLS FOR CONTROLLING COASTAL ENVIRONMENTAL WATER QUALITY." National Research Council. 1993. Managing Wastewater in Coastal Urban Areas. Washington, DC: The National Academies Press. doi: 10.17226/2049.
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Willingness to Pay for Wastewater Services

To the extent that wastewater management provides valuable services to those who either generate waste or have an interest in the quality of receiving waters, those individuals must have a willingness to pay for these services. Willingness to pay is defined as the maximum amount that would be paid for the level of service received rather than forego it altogether (all or nothing). Those who pay user charges demonstrate, by doing so, that their willingness to pay is at least as great as the charge paid. In fact, it may be much greater: the user charge merely establishes the lower bound. Estimates of willingness to pay can be performed by various indirect methods, such as econometric demand analysis (for those who pay user charges) or contingent valuation studies (for those who benefit from improved water quality).

Such studies are seldom done for wastewater systems but are potentially important. The results would indicate which groups receive benefits from improved wastewater management and what the approximate magnitude of those benefits may be. These results would also be useful in predicting public acceptance of new financing burdens, especially where large increases in financing requirements are expected. This information could be used to tailor financing strategies to the temporal and spatial distribution of anticipated benefits, thus minimizing the chances of placing unjustified burdens on any sector of the population.

REFERENCES

Bernstein, J.D. 1991. Alternative Approaches to Pollution Control and Waste Management: Regulatory and Economic Instruments, draft report. Washington, D.C.: UNDP/World Bank/UNCHS Urban Management and Environment Program.

Boland, J.J. 1989. Environmental Control Through Economic Incentive: A Survey of Recent Experience. Presented at the Prince Bertil Symposium on Economic Instruments in Environmental Control, Stockholm School of Economics, Stockholm, Sweden, June 12-14.

Bureau of the Census. 1991. Statistical Abstract of the United States, 1991. 111th Edition. Washington, D.C.: U.S. Bureau of the Census.


EPA (U.S. Environmental Protection Agency). 1990. Reducing Risk: Setting Priorities and Strategies for Environmental Protection. SAB-EC-90-021. Washington, D.C.: U.S. Environmental Protection Agency, Science Advisory Board.

EPA (U.S. Environmental Protection Agency). 1991. Economic Incentives: Options for Environmental Protection. Report of the U.S. Environmental Protection Agency Economic Incentives Task Force, March 1991.

Ernst and Young. 1990. 1990 National Water and Wastewater Rate Survey, Ernst & Young's National Environmental Consulting Group.


Federal Register. 1989. September 8. 54(173):37370-37373.

Federal Register. 1990. November 16. 55(222):47990.


OECD (Organization for Economic Co-Operation and Development). 1989. Economic Instruments for Environmental Protection. Paris, France: OECD.


PSWQA (Puget Sound Water Quality Authority). 1984. Annual Report. Olympia, Washington: Puget Sound Water Quality Authority.

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Close to one-half of all Americans live in coastal counties. The resulting flood of wastewater, stormwater, and pollutants discharged into coastal waters is a major concern. This book offers a well-delineated approach to integrated coastal management beginning with wastewater and stormwater control.

The committee presents an overview of current management practices and problems. The core of the volume is a detailed model for integrated coastal management, offering basic principles and methods, a direction for moving from general concerns to day-to-day activities, specific steps from goal setting through monitoring performance, and a base of scientific and technical information. Success stories from the Chesapeake and Santa Monica bays are included.

The volume discusses potential barriers to integrated coastal management and how they may be overcome and suggests steps for introducing this concept into current programs and legislation.

This practical volume will be important to anyone concerned about management of coastal waters: policymakers, resource and municipal managers, environmental professionals, concerned community groups, and researchers, as well as faculty and students in environmental studies.

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